Adware Maker Wins Another Legal Round

Adware maker Inc. won another court victory yesterday when a federal judge denied a preliminary injunction request from Wells Fargo and Quicken Loans, who are suing WhenU.

The ruling rebuffed the plaintiffs' claims that WhenU's pop-up ads infringed on their copyrights and trademarks. WhenU software serves contextual ads, including pop-ups, on users' desktops based on their Internet browsing habits. Wells Fargo and Quicken Loans claimed such ads, often for competitive services, confuse consumers.

Judge Nancy Edmunds of the U.S. District Court of Michigan's Southern Division disagreed, finding that “WhenU is engaged in legitimate comparative advertising.” She denied the motion for a preliminary injunction.

Terence Ross, the lawyer representing Wells Fargo and Quicken Loans, said the companies would continue with the suit despite the ruling.

“This is a bit of a setback for consumer struggles to keep these sort of annoying and confusing forms of advertising off their PCs,” he said. “Wells Fargo and Quicken have made a commitment to pursue this matter in order to reduce confusion on the Web.”

WhenU's SaveNow software pops up ads tied to user browsing behavior. SaveNow is bundled with popular software such as file-sharing service BearShare, screensavers and a desktop weather forecaster. Users agree to the display of SaveNow ads on their desktop in exchange for the free software. The company says response rates average 5 percent for the ads and can reach 20 percent for instant coupon offers.

WhenU's service resembles that of the better-known Gator, which has been the target of lawsuits. In one of the most-watched cases, Gator in February settled a suit brought by a group of major publishers who claimed that Gator's pop-up ads infringed on their copyrights and trademarks. Gator has since changed its name to Claria Corp. It is still in litigation with eight companies, including Wells Fargo.

The ruling buttresses WhenU's legal victory four months ago in a case brought by U-Haul. In that case, a federal judge similarly held that WhenU's advertising system was legal, despite claims by U-Haul that it amounted to an unfair business practice.

Like the U-Haul opinion, the judge in the Wells Fargo/Quicken Loans case made clear that ads served on the desktop do not infringe on Web site owners' trademarks and copyrights.

The company says more than 30 million computer users have its software, and it has run campaigns for 400 advertisers, including many well-known brands. WhenU CEO Avi Naider told the court that uncertainty over the legal status of adware had cost the company accounts with General Motors, American Express and Bank of America.

“Our series of legal victories in the last couple of months should remove any doubts about our approach,” Naider said. WhenU has just one other case outstanding. “I'm hopeful the market will start to understand that the contextual marketing that WhenU can offer is an incredibly powerful vehicle.”

Wells Fargo and Quicken Loans claimed that users are unaware the pop-up and pop-under ads come from WhenU. Edmunds disagreed, citing the clear WhenU branding on the ads and the user agreement during the software download.

“Although many users claim not to be aware that SaveNow has been loaded onto their computer, the court finds that some user assent is required before SaveNow is downloaded,” Edmunds stated. “The fact that assent may be in the form of a reflexive agreement required for some other bundled program does not negate the fact that the computer user must affirmatively ask for or agree to the download.”

The judge noted that WhenU does not sell advertising tied to specific Web sites but to categories. In this way, a rival mortgage broker could not target visitors to; instead, WhenU ads would be tied to users who show interest in finance and mortgages through a variety of Internet behavior.

“We're confident that once discovery goes forward that we'll be able to demonstrate to the court that there's considerable consumer injury,” Ross said.

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